The International Monetary Fund’s (IMF) executive board approved a $12bn, three-year extended fund facility (EFF) to Egypt on Friday to support the country’s economic reform programme. The loan repayment will take place over 10 years at an interest rate of 1-1.5%.
The EFF-supported programme will help Egypt restore macroeconomic stability and promote inclusive growth. It also aims to correct external imbalances, restore competitiveness, place the budget deficit and public debt on a declining path, boost growth, and create jobs while protecting citizens of lower income.
The IMF announced that following the executive board’s approval, $2.75bn was immediately disbursed as an initial tranche to the Central Bank of Egypt (CBE). The remaining amount will be phased over the next three years, subject to five reviews.
“The economic reform programme is by the Egyptian government for the Egyptian people to help the Egyptian economy,” managing director of the IMF Christine Lagarde said on Friday.
Foreign currency reserves of the CBE have increased to reach $23.3bn after receiving the first tranche of the loan on Friday. The IMF’s approval of the loan came after the CBE had already floated the Egyptian pound. The pound moved from EGP 8.83 against the US dollar to about EGP 16 on Friday.
This step came after the implementation of several economic reform policies, such as the application of the value-added tax (VAT) last August, as well as the reduction of energy subsides, and the issuance of the Civil Service Law aiming to reduce the public sector wages bill.
As one of the essential components of the government’s economic reform programme is to strengthen social safety nets and social protection, almost 1% of Egypt’s total gross domestic product (GDP) will be allocated to increase spending on food subsidies and cash transfers for the underprivileged and the elderly.